There are many situations that warrant a business valuation. Some of the most common occurrences in which an Odessa based business will need to conduct a valuation included litigation matters, preparation for the sale of a business, tax purposes, buyouts of financial stakeholders, financial reporting of acquired businesses, and issuance of a business-related insurance policy. If you need a company valuation, a fundamental question exists: How much is your Odessa company and assets worth?

However, not all companies in Odessa know where to find the right individual to perform a valuation. Conducting a company valuation takes energy and time and should be conducted by an independent valuation specialist in Odessa. Selecting a company valuation specialist/business appraiser can be complex. Small companies and big corporations often don’t know what to expect when choosing a company valuation expert. There are generally two critical questions to ask, which are: (1) How do I know if they are qualified; and (2) What should an appraisal cost?

Company Valuation Certifications

Many Odessa company owners, attorneys, and advisers aren’t sure what qualifications a trustworthy expert business appraiser should have. Just as accountants and doctors might use CPA and M.D., respectively, Odessa company valuation experts often have a set of initials confirming they have received extensive training and/or have ample experience in their field. These certifications span a broad range, but they all indicate that the business appraiser knows what he or she is doing. Here’s an overview of common certifications:

• CVA (Certified Valuation Analyst) – Issued by the National Association of Certified Valuation Analysts (NACVA). Holders must have a relevant business degree, at least three personal and business references, and have passed a proctored exam and two years or ten engagements of business appraisal experience.

• ASA (Accredited Senior Appraiser) – Issued by the American Society of Appraisers (ASA). To earn this prestigious certification, applicants must have a 4-year degree, five years of business appraisal experience, take 96 hours of ASA’s rigorous course sets, and 12 hours of oral and written exams. They must also interview with their local ASA chapter, pass an ethics test, and submit two appraisal reports before their peers. In addition, active ASAs must complete additional courses on an ongoing basis to keep their designation.

• CPA/ABV (Certified Public Accountant Accredited in Business Valuation) – Issued by the American Institute of Certified Public Accountants (AICPA). Holders must have a valid CPA, complete the ABV exam, work on ten engagements and meet business valuation experience and education requirements.

Obviously, these company valuation certificates have vastly different levels of experience to satisfy the designation. Be sure and know the difference when selecting your appraiser. Of course, these certifications aren’t tell-all determinants of an appraiser’s skill or qualifications. For example, not al CVAs are equally experienced in the same industry. Also, not al CVAs practice in the same niche. There are some company valuation experts in Odessa that focus on litigation, while others focus exclusively on transactions. Consider their work experience, industry experience, and client references. Review their website and publications made by the appraiser. While experience and expertise are really important, credentialing provides added support in a litigation environment before the court, the IRS, or when subjected to auditor review.

Buyer Beware

Make sure that your company valuation expert exercises complete objectivity when appraising your Odessa firm. An appraiser’s job isn’t to promote you, but to give an unbiased assessment of your organization’s worth. Unruly “right-hand” appraisers may overstate the value of your business for personal gain. These tactics created quite the turmoil in the late 80s real estate market. Homes were frequently overvalued, encouraging banks to hand out heftier loans. When the decade turned, the market crashed.

This is another area where certifications can help. Business appraisers with professional certifications are bound by a code of ethics that prohibits advocacy and other shady practices. Non-certified appraisers may also operate by these ethics, but it’s not guaranteed. Remember that appraisers aren’t on the side of buyers, sellers, or loan officers; they work for the good of the free market. Before you sign anything, read the appraisal agreement and verify that there is an independent clause.

Know the Costs

Depending on who you hire, a company valuation in Odessa can cost between a few thousand to well into the six figures, depending upon the scope of the project. The more services you require, especially those for litigation purposes, the more your company valuation expert will charge, especially in “high-stake” situations, most often litigation, the credentials, experience, and expertise of your valuation expert matter. Selecting a low-cost provider is often “penny wise and pound foolish,” as the results may cost more in the end. As my grandfather always said, don’t trip over dollars to pick up dimes. Also, keep in mind that litigation services can run hundreds of dollars per hour and can easily skyrocket if proceedings drag on.

Compare estimates from a variety of sources, look at their qualifications, and evaluate what your situation requires. Company valuations that will receive a high level of scrutiny from auditors, the IRS, opposing counsel, or judges will require significant documentation. However, if you’re a small Odessa business looking for an oral appraisal, fees should be lower as very little documentation (i.e., report writing) is required.